Every year, it's the simple stuff that can take a taxpayer down. Common errors cost us millions of dollars in refunds. Here are 7 most-do checkpoints to make sure these slip-ups don't happen to you:
1) Sorry, Wrong Number. One of the most common missteps is entering incorrect numbers on a tax form. We're not talking about a calculation-- just inputting the figures incorrectly. Whether it's a Social Security number or an income amount, botched transfers on the form can cost you.This includes entering the wrong bank account number when requesting a refund to be direct deposited. That refund could actually end up in someone else's account.
Make sure to double-check each number entered on your tax return.
2) Filing Under the Correct Status. With five different options available under filing status, the most accurate one for your situation may not be easily determined. Each filing status can have an impact on your tax liability. For example, filing under "head of household" is more advantageous than filing "single" if you are single and claiming dependents, because you get a larger standard deduction.
3) Mismatched Names. Newlyweds: congratulations and all that, but pay attention, because typically a wife or partner takes a new last name and the IRS isn't informed. And you get lost in the system. Divorcees: sorry and all that, but the opposite applies as well--you, too, need to notify the Social Security Administration of a name change.
If your name doesn't match the name and Social Security number the IRS has on file, your tax return might get kicked back or the process could slow down.
4) Paying Multiple State Taxes. Don't forget that income earned outside your state must be reported. If, for instance, you work in Pennsylvania but live in New Jersey, a nonresident tax return must be filed to Pennsylvania. Only the money earned in that state needs to be reported and, generally, you do get at least a partial tax credit in your home state. Check with your tax advisor on your state's rules, or consult that state's tax department website .
If you don't file this return, you could face fines, fees, and penalties, in addition to the taxes owed.
5) Staying Current on Obamacare. The biggest tax news of late is the Affordable Care Act. More specifically, you will be responsible for the Shared Responsibility Payment if you do not have health insurance and are not exempt from the law. In 2015, the ACA penalty will be 2% of your household's annual income, or $325 per adult and $162.50 per child, whichever total amount is greater, to a maximum of $925.
You need to research the latest changes to the tax code before filing your own taxes or make sure your tax pro is up to date.
6) Missing a Deduction or Tax Credit. While penalties and fees could cost you plenty, missing a deduction or tax break might cause you to pay more than you actually should, or to get a lower refund than what you're entitled to.
If you don't understand taxes, find an advisor who does.
7) Forgetting to Sign the Forms. Finally, it's a way-too-common oversight to forget to sign on the bottom line. While this may not penalize you initially, it will cause a delay in receiving any anticipated refund. For taxpayers who've allocated their refund money to pay bills, the delay might cost you in late charges. And if you owe taxes and wait until the deadline to file, failing to sign the return might result in a late fee and penalty when the IRS kicks it back for signature, and April 18th has passed. As far as the IRS is concerned, you haven't filed.
Don't let silly mistakes take money out of your pocket. Taking 5 minutes to double-check your return might mean more dollars in your bank account when you need it.